Hi Surender

This is a bit of macro, hope & leap of faith call. Allocation here is actually higher than PB.

Probably Logistics is one of the mega industries where Indian companies market cap is small compared to China or USA etc. Banking, Consumer, Insurance, Retail – all have mega caps.

My opinion is Delhivery has set cat among the pigeons in logistics with its technological & operational excellence while growing at massive rates. At these growth rates, many operating parameters will look hazy. We will have to give time & believe in management capability. Monitor them closely & if there’s any major disconnect or integrity issues, jump the ship. At the same time, we should be more skeptical!

Logistics is very complex business & operationally challenging. I think any large country will not have more than 3 pan country logistics companies as most will remain local or perish. US has Fedex/ UPS, China has 5 – ZTO express (Delhivery is trying what ZTO did).

India’s logistics still inefficient. Delhivery is customer oriented – runs low cost efficient business & efficiency gains are passed on to customers. Who doesn’t want to reduce logistics cost? Low working capital requirements.

Delhivery also is most diversified logistics company – most E-commerce, PTL, b2b, c2c, d2c. How well can they integrate all or part of these to reduce “dead space” & so reduce cost has ro be seen. Looks ambitious. Let’s monitor. This is also a play on e-commerce growth in India despite Amazon building captive logistics company.

A standalone logistics company will always be more efficient (revenue center) vs. for a captive logistics (cost center). Another example, Infosys will deliver project at a lesser cost & be time efficient than what a captive American bank’s IT team can do. So, the logic of Amazon having its own logistics may not hold tight. Yes, it may reduce growth rates but Delhivery could stand out.

Valuations are palatable relative to Nykaa (Nykaa vs. industry & Delhivery vs. industry) but is expensive otherwise. Some people are comparing cross industry valuations – I personally think we should not compare EV/sales of Nykaa to that of PB Fintech or Delhivery as the steady margins for these businesses are very very different.

This is a nice interview of Sahil:

https://www.youtube.com/embed/tyZuZyxAsZY

Disclosure: Holding with leap of faith on management’s execution & patience required 3-5 years.

Market has sellers and buyers -that’s how transactions happen. Someone is bullish and someone is bearish-that’s how mthe market functions. A bear needs someone to buy and a bull needs someone more bullish to buy from him.

Let’s respect each other views and carry on.

download-879-Outcome-of-AGM–Gist-of-Proceedings-along-with-Presentation.pdf (2.0 MB)

Agm presentation. Company eyes 25-30% growth with 10%+ margins for Fy22-23. Another interesting thing to note is company has added a lot of EV players as customers during last 2 years.

Nykaa and PB Fintech have hidden operating profits, by adjusting for discretionary expenses such as A&P, ESOP, and new initiatives. On top of that, they are B2C and asset-light.

Management can keep their focus on initiatives to scale future revenue (@30%+ CAGR) since cash from operations and cash on the book can easily cover discretionary expenses for the next 2~3 years. IMO, these traits are important for someone to show patience while owning these businesses. However, Delhivery seems weak on the above parameters.

Request your perspective.